Mortgage Reserves
What are Mortgage Reserves?
Liquid funds equal to a number of months of PITIA that the borrower holds after closing.
Mortgage reserves are liquid funds — measured as a multiple of the monthly PITIA payment — that the borrower must demonstrate they will still have after closing. The purpose is straightforward: if income is interrupted (job loss, business slowdown, tenant vacancy), the borrower has a runway of months to cover the mortgage before falling behind.
The math is simple: take the monthly PITIA (Principal, Interest, Taxes, Insurance, and Association dues) and multiply by the required number of months. That dollar amount has to remain in liquid accounts after the down payment, closing costs, and any other transactional uses of funds are subtracted out.
Eligible reserves typically include checking and savings, money-market accounts, brokerage accounts (often counted at a discount because of market risk), and vested retirement accounts (usually discounted because of early-withdrawal penalties). The discount factors vary by program; what counts is the post-closing dollar figure.
How Mortgage Reserves work at Total Quality Lending
On Total Quality Lending’s DSCR program, reserves scale with loan size: 2 months of PITIA on loans of $1.5M or less, 6 months on loans over $1.5M, and 12 months on loans over $2.5M. Cash-out refinance proceeds can be used to satisfy the reserve requirement — handy when the borrower wants to put as little of their own cash into reserves as possible.
On Foreign National DSCR, the standard is 6 months of PITIA reserves regardless of loan amount — a more conservative bar that reflects the cross-border underwriting risk. On multi-unit DSCR, reserves tier by loan size: 6 months at ≤ $1.5M, 9 months above that, and 12 months above $2.5M. Prime Time non-QM has its own LTV-driven reserve scale.